Analysts failing to appreciate how much Canada’s economy has slowed: MLI's Leading Economic Indicator

OTTAWA, ON (March 5, 2019): As Canada’s economy continues to show worrying signs of weakness, policy-makers should take into account what these poor economic indicators suggest for the first half of 2019.

The Macdonald-Laurier Institute’s Leading Economic Indicator (LEI), a tool designed to predict changes in the Canadian business cycle, remained unchanged in January. This disappointing first look at the 2019 economy comes on the heels of three consecutive months of declines.

Furthermore, this also continues a trend that has been ongoing since March of 2018. For 10 months, the LEI has pointed to weak and sluggish growth in Canada’s near economic future.

Six of the ten components of the LEI declined in January. The rate of decline moderated for commodity prices and the stock market from December, although weakness in manufacturing and consumer confidence became more pronounced.

Among the four components that did see some growth, the growth remained restrained and ultimately does not bode well for 2019.

According to LEI author and MLI Munk Senior Fellow Philip Cross, this continued weakness in these indicators is pointing to clear negative trends for Canada’s economy.

“Most analysts do not seem to appreciate how rapidly Canada’s economy has slowed,” explains Cross. For the LEI, the last few months represent “a longer and deeper decline than 2015’s near-recession.”

Cross argues that the upshot of these negative trends is that Canada is on weak economic footing with little-to-no immediate signs of improving prospects. “The pause in the overall index points to little or no economic growth in the first half of 2019.”